I had the good fortune to be invited up to speak to the TE/GE Summit recently. Many of the brightest minds in the business were present and a clear undercurrent of the discussions centered around our industry being in a state of transition. MEPs were a hot topic; there was a lot of time devoted to The Open MEP® and the ‘Prototype’ Model that we came up with to succeed it. I will talk more on the Prototype Model in the next post.
Josh Gotbaum, former CEO of the PBGC had some insightful comments about the current state of the ‘retirement crisis’ we’re in today. He mentioned it is hard to call something a crisis that has been going on— and getting worse— since the 1970s. Gotbaum pointed out the over-regulation of employers rather than of products is a key reason so many employers are unwilling to make that leap into the role of ‘Plan Sponsor’.
I relayed to the group that when we submitted for the DOL opinion letter back in 2012, 40% of our plans were start-ups, and tried to convey how this is such a big deal. You can only get people in plans when employers (of which 50% out there do not have a plan) start to offer one; The Open MEP® offered quantifiable proof this was possible. Simply put, a plan built to specifically address cost and liability for the small employer works.
Is The Open MEP® coming back? All signs are pointing in the right direction, I believe it’s a resounding yes. That said, it is worth touching on why the DOL has been so against MEPs, and why, suddenly, they are not.
The 1980s offered the DOL countless reasons to rally against MEWAs (Multiple Employer Welfare Arrangements); while these were on the health/benefit side, they were groups of employers that were all but impossible to monitor, let alone ensure participants were protected. There are many instances of abuse and fraud in these arrangements–and the DOL’s stance on them is commendable—but this has nothing to do with Multiple Employer Plans. The commonality/nexus requirement was a fabricated way of policing MEWA activity, as there is nothing in ERISA about this requirement at all. In the context of MEWA ‘policing’, one can see why such an interpretation was inserted into these unwritten rules, they had the best of intentions. Problems arise when this bureaucratic documentation requirement bleeds over to MEPs; such over-regulation increases costs and actually hinders a program that helps mitigate the national coverage issue.
Can we get the DOL to disassociate the MEWAs from the MEPs? However reluctant they were to do so in the past, including our 2012 opinion letter, it seems they are open to it now. In an interpretive bulletin (an overview of it can be found here), the DOL laid out guidelines for states wishing to offer open MEPs. As I mentioned in the last post, shortly after the bulletin was published, President Obama announced he wanted to see a loosening of the rules surrounding MEPs— and the rally to bring back The Open MEP® really began.
So here we are. The enthusiasm is gaining steam again— but this time it is for the right reasons. The first time around, there was a novelty aspect to The Open MEP® — and how it offered an easy conversation with the fiduciary marketing that accompanied the model. Today, we’re seeing ‘coverage’ as the big deal that it is— and that is a good thing when it comes to doing what is in the best interest of the participant. Stay tuned, our journey through the mechanics of The Open MEP® continues…